5/7/14 Elliott Wave Update

Last time it was stated, "there is no change to the Elliott Wave options in the long term.  In relation to the ending diagonal options, a sideways pattern since (1) remains a lesser option due to the complexity and proportionality of the pattern."  The same remains true today.  Obviously a new all-time high is required if one of the ending diagonal options is correct.

There are still several good options to explain the rally higher since the March 2009 low.  It remains to be seen whether this is a multi-year zigzag correction or an impulse higher.

The possible flat lower since (3) has been removed as an option.  The reason is that the last all-time high was never reached and the [b] wave can now essentially only be counted as a double zigzag.  A flat options from A in February to (4) remains weak.

The best options in the chart above are a sideways pattern since A in April (with a triple zigzag underway since [b]) and a triangle which the count in color represents (the upper dotted blue line is the symmetric line where [d] is projected to terminate).  Both of these options obviously suggest that a correction since A is incomplete.  If prices continue to move higher from today's low, a diagonal since the (4) or [a] low is most likely underway.  But a sideways correction is a stronger option.

There is clearly a corrective structure lower since [b] and this is a bullish feature.  The very corrective looking rally higher from today's low is an indication that a larger corrective pattern is not yet complete however.  Triple zigzags are rare, but a zigzag move down to 1850 following at most a very minor rally tomorrow morning would be a well-proportioned triple zigzag move.  If 1881 is broken to the upside, the triangle count will remain a strong option.  The diagonal choices from the (4) or [a] lows will not gain much of an advantage until 1886 is exceeded.  Even then it will not be certain whether or not a sideways pattern is still underway since the April A high until the size in price of [b] is exceeded by the move.

Bottom Line:

Last time the short-term summery was marked at "bearish".  Price did retreat.  It was also stated that, "the waves higher since the 28th look corrective.  Since there were 3 waves higher that nearly made a new all-time high above (3), the medium-term remains bullish.  A test of the 1815 level remains possible, but ~1845-1850 should hold prices."  Due to the zigzag action lower since [b], it is now unlikely that ~1845-1850 will not support prices before a new all-time high.  This appears to be a very good buying level for a trade with limited risk, if prices reach that low.

While things look bullish in the medium-term, a consolidation period looks incomplete in the short-term.  If prices continue higher since [c] without making a lower low and exceed 1886, things will look more bullish, but this scenario is not that likely.

short-term (hours to days): sideways

medium-term (weeks to months): very bullish

long-term (months to years): bearish

very long-term (years-decade): neutral

5/2/14 Elliott Wave Update

There is no change to the Elliott Wave options in the long term.  In relation to the ending diagonal options, a sideways pattern since (1) remains a lesser option due to the complexity and proportionality of the pattern.

Note that the wave higher from (4) is small in relation to (3) and (1).  This suggests that more development of the wave underway since that time will occur before it is complete, whether or not an ending diagonal or sideways pattern is ongoing.

There are several reasonable options in the chart above.  A flat or other sideways pattern lower since (3) is a good option, except prices have not yet reached the April high.  A test of this level would improve the option substantially.

There can also be a flat lower from the A high.  This option makes a greater deal of sense because A was exceeded by [b] and the [b] wave looks complete.

Why does [b] look complete?  First, it looks corrective.  When looking for impulsive options higher, the sell-off following the Friday high has no good proportionality with any wave within [b] with the exception of a sideways pattern from the 29th-30th.  Because the 30th-2nd rally really cannot be counted as an impulse wave, the most bullish count in the chart above is a flat lower since the 29th.  Second, the structure of the [b] wave higher is complex and already difficult to count as a double zigzag given the lower low made on Friday.  The lower low and overlap that came with it only reduced the amount of possibilities.

If there is a flat lower since the 29th, the structure of it is a very wide and complex pattern making it undesirable.  Therefore the wave count in color is preferred.

Bottom Line:

Last time, it was stated, "at this time, the waves do not suggest an impending correction of anything substantial".  This came to fruition last week.  However now the waves higher since the 28th look corrective.  Since there were 3 waves higher that nearly made a new all-time high above (3), the medium-term remains bullish.  A test of the 1815 level remains possible, but ~1845-1850 should hold prices.  A test of this level is expected before any meaningful rally resumes in the short-term.

The long-term suggests a winding down impulse wave from a late 2011 low, but the intention of the market after this impulse completes remains uncertain.  There can be a zigzag or impulse higher since the 2009 low which have much different implications for the market in the years ahead.  This makes the view neutral in the long-term.

short-term (the week ahead): bearish

medium-term (the weeks/months ahead): bullish

long-term (months to years): bearish

very long-term (years-decade): neutral

4/25/14 Elliott Wave Update

The longer-term options remain unchanged.  Testing a new all-time high will signal an ending diagonal is probably underway since 2013 beginning at [4], B, or (2).  If this happens, the sideways correction option since (1) is still possible, but not very strong.

There appears to be either a zigzag or impulse higher forming since the 2009 low.

Because 1875 resistance was broken last week and there is now a large retracement of the (4) down move, the possible flat higher since W option has lost a good amount of strength.  A flat higher from Y is quite weak because it is so off balance and its waves lack so much proportionality.

An impulse higher unfolding since (4) is possible, but it requires a flat down since A in February.  This option is really a stretch of the imagination.

A flat lower underway since the (3) high is possible, but as mentioned on Wednesday, this would be a very rare corrective wave within an ending diagonal.  A flat in this position would work best as wave 'x' within a double zigzag higher since (2) which is the 'b' wave of sideways correction since the [4] high from 2013.

There are two good possibilities to describe wave action higher since 4/15: an impulse (in color above) or a zigzag.  Wave [x], since it was so close to exceeding A, makes the waves down since A look like a correction.  Really the entire structure from the 22nd-24th high is a very corrective statement by the market.  Even though support around 1870 did not hold, waves down since A should be a correction of some kind, probably a flat or double.  A sideways correction in this position works well with the idea that a zigzag-family pattern higher is unfolding since the (4) low, the theme of this post no matter what the correct wave count is.  This is because second waves are usually zigzig-family corrections.

Bottom Line:

The short-term waves look bullish and a test of ~1900 resistance is likely to happen within the next week or two.  A continued correction since A is possible, but prices will likely simply move higher.  The sideways option since (1) in January 2014 is not strong but is still acceptable if there is a new all-time high in the short-term.  The best view is an ending diagonal higher unfolding since [4] in 2013 or later where prices will exceed 1900 to challenge the upper red line in the first chart.

An ending diagonal would likely complete the impulsive move higher since the late 2011 low of [C] or b.  What happens after this impulse wave terminates is not clear, but at least a 5% or 10% correction should happen no matter which wave count is correct.

short-term: bullish

medium-term: bullish

long-term: bearish

very long-term: neutral

Note:
The next update will be Friday 5/3.